Solving State Budget Challenges with Cap and Invest

THE BOTTOM LINE.

Passing the Oregon Cap and Invest bill in 2018 also holds potential to address state budget challenges.

Almost a week ago Oregon Senate leaders expressed doubt that the state would pass a carbon Cap and Invest bill during the 35-day 2018 legislative session. Senator Peter Courtney indicated that addressing budget gaps should be the legislature’s top priority. Notwithstanding the fact that 2018 will be the third consecutive session debating Cap and Invest, passing this bill can actually help stem budget shortfalls.

Looking to the east, New Jersey Governor Phil Murphy signed an Executive Order last week to rejoin the Regional Greenhouse Gas Initiative (RGGI) a cap and trade market consisting of several Northeast states. The top reason he noted for re-entering RGGI is the loss of nearly $300 million to the state budget resulting from leaving the RGGI market in 2011. In Oregon, estimates of state revenues from establishing a cap are several times higher as Oregon could be foregoing a few hundred million dollars of revenue annually.

Adopting a cap on greenhouse gas emissions also produces several positive economic benefits. In the first eight years of RGGI, the cap and trade market generated $2.9 billion in economic growth, 30,000 job-years (i.e. equal to one full time job for a year), and $618 million in energy bill savings. Putting dollars in people’s pockets, and creating new economic and employment opportunities generally translate into additional revenues to feed a state’s budget.

Oregon is faced with challenging budget issues, but evidence from other states shows that dedicating time to pass a Cap and Invest bill can alleviate budget pressures. Focusing on legislation to place a cap on carbon is consistent with taking steps to address Oregon’s budget challenges.